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We are proud to announce that India is the first country to pass a corporate social responsibility (CSR) law. The new law requires larger companies (with profits of at least $80 million over the past 3 years) to spend at least 2 percent of each year’s profit on CSR initiatives. The government hopes this law will encourage companies to invest more in green initiatives such as social development. In order to enforce the law, the initiatives that companies undertake will be audited yearly, penalties will be assigned for non-compliance.

Additionally, companies will be required to have at least 1/3 of their board being independent board members, term limits for board members must be five years, and at least one board member must be female. Other requirements include the disclosure of any differences in salaries between directors, 2 years’ worth of severance pay for employees whose company’s shut down, and criminal liability assigned to auditors if they knowingly or recklessly omit information in their reports. Overall, the government’s Serious Fraud Investigation Office, which investigates corporate fraud, will be responsible for monitoring the compliance of the law.

As this legislation aims to ensure equitable and sustainable growth in India, this seems like a very good step in a direction that will lead to positive growth for this emerging market.